Land Bank: Fixed Income Investor Roadshow - FY2019Q3

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Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Land Bank:
Fixed Income Investor Roadshow – FY2019Q3

                                            Land Bank Presentation   1
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Investor Roadshow – FY2019Q3
Key Contacts
Land Bank
Bennie van Rooy                                 Konehali Gugushe
Acting Chief Executive Officer                  Acting Chief Financial Officer
+27 12 686 0914                                 +27 12 686 0941
BVanRooy@landbank.co.za                         KGugushe@landbank.co.za
Sydney Soundy                                   Mohammed Alli
Executive Manager: Strategy and Communication   General Manager – Investor Relations
+27 12 686 0881                                 +27 12 686 0519
SSoundy@landbank.co.za                          MMAlli@landbank.co.za
Stefan Jansen van Vuuren
General Manager – Treasury
+27 12 686 0783
Sjvanvuuren@landbank.co.za
Arrangers – Rand Merchant Bank (RMB)            Arrangers – Basis Points Capital (BPS)
Delia Patterson                                 Sisanda Tuku
DCM Distribution                                Chief Executive Officer
+27 11 282 1358                                 +27 11 783 6136
Delia.Patterson@rmb.co.za                       Sisanda@Bpscapital.co.za
Angela Mangope                                  Zefa Nsibande
DCM Origination                                 DCM Transactor
+27 11 282 1358                                 +27 11 783 6136
Angela.Mangope@rmb.co.za                        Zefa@Bpscapital.co.za

                                                                                         Land Bank Presentation   2
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Contents

1. Business Overview

2. Land Bank 2023/2024

3. Financial Overview

4. Funding Matters

5. Debt Management Programme

6. Interest Rate Risk Management

7. March 2019 Issuance – DRAFT Term Sheet
                                            Land Bank Presentation   3
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Business Overview

                    Land Bank Presentation   4
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Governance Matters
Board Compositions                                                                   Shareholder                          Executive Authority
1 – Reappointed for 3 years with effect 1 June 2018                               Minister of Finance
2 – Newly appointed for 3 years with effect 1 June 2018
3 – Reappointed for 3 years with effect 1 October 2018                                                         Accounting
4 – Mr. TP Nchocho resigned in Dec 2018. Refer Interim Management Structure       Board of Directors
                                                                                                                Authority
5 – New incumbent starts 1 March 2019

                   Mr. MA Moloto1                 Ms. D Hlatshwayo1
                                                                                    Ms G Mtetwa               Ms. DN Motau                     Ms. SA Lund1
                    Chairperson                   Deputy Chairperson

                   Dr. S Cornelius2                Ms. TT Ngcobo                   Adv. S Coetzee3            Ms. M Makgatho3                 Mr. M Makgoba2

                                                                                   Board Committees

          Risk and Governance                     Audit and Finance                Human Capital               Social & Ethics                    Credit and Investments
               Committee                             Committee                      Committee                   Committee                               Committee
    •   Enterprise Risk Management            •   Internal and External       •    Monitor, review       •   Monitor, review              •    Review and recommend credit
        Framework, Governance                     Audit matters                    and oversee all           and oversee all                   policies, frameworks as well as
        Architecture, Risk Appetite           •   Accounting policies              Human Capital             Social, Ethics and                prudential limits and
        and Tolerance Framework                   and methodologies                matters                   Environmental                     guidelines
    •   Approve the Bank’s Risk               •   Financial matters                                          matters                      •    Review and approve or
        Management Plan                                                                                                                        recommend credit facilities in
    •   Review and Monitor the                                                                                                                 line with Delegations of Power
        management of all Risks in                                                                                                        •    Monitoring
        the organisation
                                                               All Board Committees are accountable to the Board

                                                                                  Executive Committee               Exco Accountable to
                                                                                                                           Board
               Vacant5                Mr. B van Rooy4           Ms. K Gugushe4                      Mr. F Stiglingh               Mr. S Soundy             Ms. M Dlamini
                CEO                         CFO                      CRO                      EM: Portfolio Management            EM: Strategy           EM: Human Capital

              Dr. L Magingxa                       Vacant5                        Ms. L Ndlovu               Mr. S Sebueng                  Mr. M Mzaidume
            EM: Agri Economics                    EM: CB&SI                        EM: CDDB                   EM: Legal                   (Company Secretariat)

                                                                                                                                                 Land Bank Presentation          5
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Governance Matters
 Interim Management Structure

Mr Bennie van       Ms Kone             Mr Sydney Soundy    Mr Faride Stiglingh    Ms Loyiso Ndlovu   Mrs Unathi Magwentshu
Rooy                Gugushe             EM: Strategy &      EM: Portfolio          EM: Commercial     EM: Corporate Banking and
Acting Chief        Acting Chief        Communications      Management Services    Development and    Structured Investments
Executive Officer   Financial Officer                                              Business Banking
                                                                                                      Starts 1 March 2019

Ms Nafiza Khan         Mr Sakhumzi Diza        Mr Stephen          Dr Litha Magingxa    Ms Mpule           Mr Maniki Rakgalakane
Acting Chief Risk      Acting Chief Risk       Sebueng             EM: Agricultural     Dlamini            MD: Land Bank
Officer: Risk          Officer: Credit         EM: Legal           Economics &          EM: Human          Insurance Company
                                               Services            Advisory             Capital

                                                                                                        Land Bank Presentation   6
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Industry Matters
Drought
                                                               Crop Estimates 2018/2019
• Apart from the Western, Eastern and Northern Cape
                                                                • Insufficient rain during optimal planting periods were experienced to the
  weather patterns have vastly improved with the outlook
                                                                  west of the country at the start of the new grain season.
  for another good rainfall season in the “summer crop”
  areas. Summary of Land Bank’s position in relation to the • Yellow maize and soya plantings proceeded in Mpumalanga, eastern Free
  aforementioned:                                                 State and Gauteng as expected. White maize and sunflower plantings
                                                                  delayed, but sufficient surplus of white maize from previous seasons.
  Delivery Channel        Exposure          NPL    Collateral 1
                                                                • Final hectares planted is ca. 2% less overall than 2017/2018 season.
  Eastern Cape            R1,197.1m        R57.6m    R212.8m    • Better rains are predicted for the remainder of the season, but final yields
                                                                  may be lower due to late planting dates.
  Northern Cape           R1,617.3m        R10.4m     R34.0m
                                                                • Some international crop observers estimate that South Africa’s 2018/19
  Western Cape              R830.4m        R50.1m    R242.5m      maize harvest could vary between 10.7 and 11.5 million tonnes. A harvest
  Total                  R3,644.8m        R118.1m    R489.4m      at this level would mean that South Africa would be self-sufficient in the
                                                                  2019/20 marketing year, accounting for an opening stock from the previous
  1 – Collateral In respect of NPL’s only                         season.
                                                                Foot and Mouth Disease
• Drought relief support extended to date:
                                                                • In January, an outbreak of FMD was detected in the Vhembe district in
                           FY2019Q3         FY2018     FY2017     Limpopo, a FMD-free area and South Africa’s meat exports were
  Loans approved             R392.5m        R334.8m R207.6 m      suspended and weaner calf & beef carcass prices have declined as a result.
                                                                • The impact of the loss of the FMD-free status go beyond meat products
  Loans disbursed            R339.9m        R302.8m R117.8 m
                                                                  and affect exports of other livestock products. Free zone status can be
  Support available             R7.5m        R65.2m R192.4 m      regained within a year.
• Pipeline for consideration:                                   • Task teams were put in place to convince SA's trading partners not to
        Applications:           11                               suspend the import of red meat and its by-products from SA. Following
        Amount:                 R52.5m                           these engagements, trade restrictions on the export of processed products
                                                                  have been relaxed by many trade partners
• Land Bank could potentially avail some of it internal funds
                                                                • Land Bank’s exposure to the affected area is minimal and FMD will
  to provide further assistance.
                                                                  therefore have no meaningful impact on the Land Bank’s loan portfolio.

                                                                                                                 Land Bank Presentation   7
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Industry Matters
Land Reform
Risks:                                                                        Opportunities:
• We have identified opportunities around the implementation of               • In the case of well-executed land reform that is supported by the
  expropriation without compensation, however it would be prudent               necessary institutional arrangements and grant funding:
  to caution that if this process is poorly executed it could have
  damaging consequences for the Bank as a creditor, bringing the                       The Bank would be able to increase lending for
  organisation’s sustainability under threat. Poor execution would                      transformational purposes and grow the sector;
  include:                                                                             Additional new-generation farmers, including youth and
                                                                                        women, would be able to enter the sector thus improving
            Productive land being taken out of production;                             equality and inclusivity;
            No protection for creditors;                                              New-generation farmers, especially youth, would have a
            No effective institutional processes;                                      positive impact on the age profile of the sector and
            Poor and undefined process for selection of beneficiaries;                 support a future client base for the Bank;
            Corruption; and                                                           Additional farmers would enable job creation, especially if
            Lack of comprehensive support for beneficiaries.                           capacity is created in food-processing and the Bank could
                                                                                        undertake value-chain based financing.
• Uncertainty could jeopardise the ability of the Bank to raise funding
  in the domestic market.
• Funding agreements with “expropriation” events of default clauses
  included amount to R9.0 billion, with “cross defaults” across the
  R41 billion funding portfolio, which would require government
  intervention to settle our lenders.

 Conclusion:
 While the proposal around expropriation without compensation has taken precedence, we consider improving the overall land reform
 programme to achieve its stated objectives as a key departure point for the process.
 In our opinion, as part of the broader land reform programme, expropriation (with or without) compensation, if it is well executed, has the potential for
 some significant economic and social benefits that may accrue to the economy of South Africa in general and to the agricultural sector in particular.

                                                                                                                           Land Bank Presentation     8
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Land Bank 2023/2024
Financial Sustainability vs. Development Impact

                                          Land Bank Presentation   9
Land Bank: Fixed Income Investor Roadshow - FY2019Q3
Land Bank 2023/2024
Future Client Segmentation and Focus

                                                                           Future focus
   Current                                                               Commercial Unit
 client focus
                     Large/                                Large/
                   Mega farmers                          Mega farmers

                  Medium scale         Future focus     Medium scale
                commercial farmers     Development    commercial farmers
                                           Unit
                Smallholder farmers                   Smallholder farmers

                Subsistence farmers                   Subsistence farmers

                Current client focus                  Future client focus

                                                                     Land Bank Presentation   10
Land Bank 2023/2024
“Development” Land Bank

                          Land Bank Presentation   11
“Development” Land Bank
Factors constraining smallholder farmers

•   Lack of affordable access to finance by Development Clients – the funding structure of Land Bank is effectively
    “Commercial”.

•   Beneficiaries’ balance sheets are Highly Geared (Not enough equity).

•   Lack of grant funding to support projects.

•   Inadequate recapitalisation financing.

•   Mismatch in tenure where land is procured through lease arrangements.

•   Lack of risk mitigation instruments / structures.

•   Inadequate Risk Insurance for projects.

•   Lack of appetite for investments by Private Capital.

                                                                                             Land Bank Presentation   12
“Development” Land Bank
Foundation Principles

The foundation principles for a more effective development finance model for agriculture include the following:

•   Expand the role of the Bank beyond merely providing financial services to smallholder farmers and agri-
    entrepreneurs;
•   Debt financing on its own is not sustainable or adequate to address the challenges;
•   Secure access to suitable land at an affordable cost and for a reasonable term is critical;
•   Pre-investment support is required to develop business cases that are owned by the farmer and responds to both
    the bank and client’s needs;
•   Technical support and extension type services are an integral part of the solution; and
•   Blended financing that includes private sector funding and government grants administered by Land Bank is one
    aspect of the solution.

                                                                                                  Land Bank Presentation   13
“Development” Land Bank
Potential Pre- and Post-finance Activities
Expand role of Land Bank beyond receiving, evaluating and financing applications. Holistically address and support the
missing elements in development farmer environment by:

•   Providing enhanced support in the pre-financing preparation stage through:
             Facilitating preparation of projects and business plans to bankable stage.
             Sourcing designated grant funding for this purpose.
•   Broadening Land Bank’s financing offering by:
             Incorporating mezzanine debt to address equity and collateral shortfalls.
             Combining Bank balance sheet mezzanine funding with grants to offer lower blended mezzanine
              lending rates.
             Conventional secured Land Bank senior debt to accompany mezzanine.
•   Strengthening post-financing operational performance through providing:
             Externally funded and monitored comprehensive business support and mentoring by co-operatives,
              industry bodies etc.
             Funded LBIC insurance risk mitigation.

The Pre- and Post Finance Services will come with additional value-adding but non-revenue generating activities which
will not be possible without appropriate government funding and grant support. The split of the Bank into the
Development Bank and the Commercial Bank is premised on appropriate government support.

                                                                                               Land Bank Presentation   14
Financial Overview
Group

                     Land Bank Presentation   15
Performance Overview: Summary
Salient Features - Group
                                                                             Var %           FY2019H1         FY2018H1 1          FY2018
 Net interest income                                                                   -        R 580.4m            R 583.1      R 1,278.4m
 Impairments                                                                    (26.4%)         R 108.9m          R 147.9m          R 55.5m
 Operating expenses                                                                4.7%         R 298.9m          R 285.4m         R 654.5m
 Profit after Other Comprehensive Income                                         20.7%           R 63.1m           R 52.3m         R 193.9m
  - Banking Operations                                                           +100%           R 61.9m           (R 4.6m)        R 182.3m
  - Insurance Operations                                                        (97.9%)            R 1.2m          R 56.3m          R 11.6m
 Cash                                                                            23.1%            R 3.2bn           R 2.6bn         R 2.4bn
 Investments                                                                           -          R 2.4bn           R 2.4bn         R 2.6bn
 Net loans and advances                                                            5.2%          R 41.8bn          R 39.7bn        R 43.4bn
 Total assets                                                                      6.6%          R 48.5bn          R 45.5bn        R 49.5bn
 Key Ratios
 Net interest margin 1                                                           (3.4%)              2.8%              2.9%               2.9%
 Cost-to-income ratio 1                                                            4.9%            63.9%             60.9%            60.5%
 Impairment ratio                                                                (3.8%)              5.1%              5.3%               4.7%
 Non-performing loans                                                           (27.5%)              7.4%              5.8%               6.7%
 NPL coverage ratio                                                             (17.4%)            75.8%             91.8%            70.2%
 1 – FY2018H1 results have been restated to reflect the impact of the LDFU reclassification from “Discontinued Operations: Disposal Group”
 to “Discontinued Operations” which resulted in certain liabilities and Interest expenses being reclassified to “Continuing Operations”.

                                                                                                                 Land Bank Presentation    16
Performance Overview: Balance Sheet
Statement of Financial Position – Strong Bank asset and liability profile
                                                                                                  FY2019H1        FY2018H1            FY2018
                                                                                    Var %              R’m             R’m               R’m
 Cash and cash equivalents                                                         30.1%            3,138.3          2,446.5          2,362.1
 Net loans and advances                                                             5.2%           41,817.2         39,748.5        43,418.5
 Investments 1                                                                      2.8%            1,242.1          1,208.6          1,406.7
 Assets of Discontinued Operations classified as held-for-sale 2                  (94.8%)                9.9           188.9             147.3
 Other assets                                                                      93.1%              830.5            430.2             398.0
 Total assets                                                                       6.8%           47,038.0         44,022.7        47,732.6
 Capital and reserves                                                               4.5%            5,602.4          5,360.4          5,546.9
 Liabilities                                                                        7.2%           41,435.6         38,662.3        42,185.7
 - Funding liabilities                                                              7.5%           40,944.4         38,081.9        41,576.3
 - Other liabilities                                                              (15.4%)             491.2            580.4             609.4
 Total equity and liabilities                                                       6.8%           47,038.0         44,022.7        47,732.6
 1 – Investments consist of:
 • Investment in Subsidiaries                                                           -             350.0            350.0             350.0
 • Investment in listed shares                                                    (35.0%)             128.1            197.0             146.3
 • Unlisted investments                                                           +59.8%              480.4            300.6             565.1
 • Assets earmarked for Medical Aid Liability 2                                   (21.4%)             283.6            361.0             345.2
 2 – During FY2019H1, the Bank concluded a buy-out i.r.o. some “pensioners” at a cost of R66.4m. The liability had reduced to R311.9 million.
 3 – As of FY2019H1, the “Out of Mandate LDFU portfolio” had reduced significantly following the conclusion of a number of sales. Post
 FY2019/H1, the last property was sold and the legacy portfolio is now a thing of the past.

                                                                                                                  Land Bank Presentation    17
Performance Overview
Loan Book segmentation – Significant contribution by indirect channels

                   Loan book                                                        Loan book
                   FY2019H1                              30.3%                      FY2018                                29.1%

                                   69.7%                                                           70.9%

                                                                          CB&SI         CDBB

        CDBB (Delivery Channel) – R’bn                                                  CB&SI (Delivery Channel) – R’bn
 26
 24                                                                              15.0
                                                   *           FY2019H1
                                                                                 14.5                                                                FY2019H1
                                                               FY2018            14.0                                                                FY2018
                                                                                 13.5
  6                                        24.3
                                  22.6
  4         7.2     7.0
                                                                                                     13.0
  2                                                                               0.5       13.0
                                                                                                                    0.4                      0.6      0.6
  0                                                      0.9     0.9              0.0                                         0.2
              Direct              Indirect - SLA        Indirect - WFF                          Direct                SI - Debt               SI - Equity

 CDBB = Commercial Development Business Bank                                             * During FY2019H1, the SLA portfolio had reduced by ca. R1.7bn
 CB&SI = Corporate Bank & Structured Investments                                         following a good harvest in respect of the 2017/2018 season. This
 Direct = Lending activities through Land Bank’s own infrastructure                      reduction is seasonal and the portfolio is expected to increase as we
                                                                                         progress through the working capital cycle of the2018/2019 season.
 Indirect = Lending activities through intermediary partners, i.e. SLA, or WFF

                                                                                                                                  Land Bank Presentation      18
Performance Overview
Satisfactory loan book performance
                                                                       Loan Performance - %
                                            7.4%                                                             6.7%
                     Loan book                                                      Loan book         7.6%
                                     8.8%
                     FY2019H1                                                       FY2018

                                                     83.8%                                                          85.7%

                                  Stage 1: Performing loans        Stage 2: Under-performing loans     Stage 3: Non-performing loans

  20                                                                               2.5
       CDBB - %                                                    FY2019H1               CB&SI - %                                                FY2019H1
                                                                                   2.0                                                             FY2018
  15                                                               FY2018
                                                                                   1.5
  10
                                  16.3%     15.6%                                  1.0         1.9%     2.0%              1.9%         2.0%
   5       9.8%     8.6%                                  7.9%        6.7%         0.5

   0                                                                               0.0
             Total NPL              Direct NPL                Indirect NPL                       Total NPL                  Direct NPL

  CDBB = Commercial Development Business Bank                                        As at FY2019H1 there was a slight uptick in NPL’s largely in the CDBB
  CB&SI = Corporate Bank & Structured Investments                                    “Indirect” portfolio. This is not as a result of an increase in NPL’s in
  Direct = Lending activities through Land Bank’s own infrastructure                 absolute values but rather as a result of the seasonal reduction of loan
                                                                                     book which decreased by ca. R1.7bn from FY2018
  Indirect = Lending activities through intermediary partners, i.e. SLA, or WFF

                                                                                                                                 Land Bank Presentation     19
Performance Overview
Strong capital adequacy position
  Following Land Bank’s voluntary introduction of a number of the
                                                                    Total capital adequacy ratio
  Basel Accord’s capital and liquidity risk management practices
                                                                                              -2.3%                         -1.2%
  during FY2016, the Bank’s balance sheet has been significantly
  strengthened.                                                     18%           17.7%                         17.3%                     17.1%
                                                                    16%
  The Basel-like principles include:                                               5.7%                          5.5%                      5.2%
   Total Capital Adequacy Ratio (TCAR) – Basel II standardised     14%
    approach                                                        12%
   Liquidity Coverage Ratio (LCR) – Basel III; and                                1.1%                          1.1%                      1.1%
   Net Stable Funding Ratio (NSFR) – Basel III                     10%
                                                                     8%
  Approved deviations:
                                                                     6%
                                                                                  10.9%                         10.7%                     10.8%
  CAR                                                                4%
   Inclusion of Government guarantees as Capital Supply             2%

  LCR                                                                0%
                                                                                  FY2017                    FY2018                       FY2019H1
   High quality liquid assets
   Roll-over rates                                                         Guarantees         Tier 2 Capital           Tier 1 Capital        CAR Covenant

                                                       -0.1%
               17.3%
17.30%
17.25%                                                                                                          The year-on-year decline in CAR is as a
                                                                                          17.2%
17.20%                             -0.2%                            0.0%                                        result of slight decrease of R90 million
17.15%                                                 0.1%                                                     in available guarantees included as
17.10%                                                                                                          sources of “Capital Supply”

 0.00%
               FY2018            Guarantee      Capital Movements   RWA                  FY2019H1
                                                     (T1 + T2)

                                                                                                                          Land Bank Presentation             20
Performance Overview
Strong Funding and Liquidity position
            Cash                                                    Liquidity Cover Ratio                          +84.0%
                                                +32.9%
            3,500                                                   400%              +152.1%                                394.4%              100%
                                                          3,138
                              +95.1%                                                                   214.3%                                    90%
            3,000
                                                                    200%                                                                         80%
                                       2,362
R million

            2,500                                                                                                                                70%
                                                                    150%                                                                         60%
            2,000
                                                                                                                                                 50%
            1,500
                      1,211                                         100%     85.0%                                                               40%
                                                                                                                70%                    80%
                                                                                     60%                                                         30%
            1,000
                                                                     50%                                                                         20%
             500                                                                                                                                 10%
                                                                      0%                                                                         0%
               0                                                                FY2017                    FY2018                FY2019H1
                     FY2017            FY2018            FY2019H1
                                                                              LCR     LCR Target

            The Bank’s cash requirements are driven by LCR.         Net stable funding ratio
                                                                                         +25.3%                    +1.9%
            Land Bank has access to a number of liquidity           120%                                                                         100%
                                                                                                       108.6%                110.7%
            facilities which it taps into from time to time, of                                                                       100.0%
                                                                    100%     86.7%                              90.0%                            80%
            which:                                                                   80.0%
                                                                     80%
                                                                                                                                                 60%
                                                                     60%
            • R2.15 billion Committed                                                                                                            40%
            • R0.50 billion Uncommitted                              40%
                                                                     20%                                                                         20%

            As at 30 September 2018 all facilities were               0%                                                                         0%
                                                                                FY2017                    FY2018                FY2019H1
            undrawn
                                                                              NSFR       NSFR Target

                                                                                                                            Land Bank Presentation     21
Funding Matters

                  Land Bank Presentation   22
Funding Matters
Strong credit rating supports funding profile
                                                                            Commercial Funding:
 • Land Bank procures funding for two distinct business
   purposes:                                                                • Funding is raised from Institutional Investors and Commercial
              Commercial Operations                                          Banks
              Development Operations                                       • Funding is generally unguaranteed
 • Limited sources of capital                                               • Funding is applied for:
 • Reliant on debt capital markets, as well as multilateral                         Corporate/ wholesale on-lending
   institutions for funding                                                         Corporate and commercial agribusiness
                                                                                    Financing “primary” agriculture
 Credit Rating:                                                                     Financing “secondary” agriculture through the value
 • Land Bank is rated by Moody’s                                                     chain
 • Global Scale Issuer Rating: Baa3 (linked to Sovereign rating)                    General working capital requirements
 • National Scale Issuer Rating: Aa1.za                                     Development Funding:
 • Last rating: 12 September 2018
                                                                            • Funding is raised from Multilateral Institutions
 Development Finance Institutions                                           • Funding often requires Government Guarantees
  Rating       Land Bank      DBSA          IDC                             • Funding is applied for:
                                                                                    Agricultural “sector growth”
 GSIR              Baa3          Baa3         Baa3
                                                                                    Sector transformation in terms of ownership
 NSIR             Aa1.za       Aa1.za       Aa1.za
                                                                                    Emerging farmers
 Commercial Banks
                                                                            Development funding is ring-fenced and has strict disbursement
 Rating            ABSA     First Rand    Investec    Nedbank       SBSA    conditions and reporting requirements.
 GSIR              Baa3          Baa3         Baa3         Baa3     Baa3
 NSIR             Aa1.za        Aaa.za      Aa1.za       Aa1.za    Aa1.za

                                                                                                                     Land Bank Presentation   23
Funding Matters
Maturity Profile – RttM
Amortised Cost - RttM              Total            Excl. PIC/ CPD       FY2019Q3 – Remaining time to Maturity “RttM”
FY2019Q3                     R’m            %       R’m         %                            3.0%
Drawn Facilities             1,304          3.0%    1,304       4.1%                 14.3% 0.2%
                                                                                                                           Drawn Facilities
< 1 Year                    20,444         47.8%    9,628      30.1%          2.5%                                         < 1 Year
1 – 3 Years                  3,818          8.9%    3,818      11.9%                                                       1 - 3 Years
3 – 5 Years                  9,934         23.2%    9,934      31.1%                                                       3 - 5 Years
                                                                                                         47.8%             5 - 7 Years
5 – 7 Years                  1,075          2.5%    1,075       3.4%       23.2%
                                                                                                                           7 - 10 Years
7 – 10 Years                 6,102         14.3%    6,102      19.1%
                                                                                                                           > 10 Years
> 10 Years                      92          0.2%       92       0.3%
Total                       42,769         100%    31,953      100%                    8.9%

Funding Strategy                                                         Liquidity position
• Land Bank continues to manage its refinancing risk responsibly,        • The Bank’s liquidity position has been vastly improved with the
  within the parameters of its MT Target of maintaining its reliance       introduction of longer-dated funding, reducing call bond
  on short-term funding (maturities < 12 months) below 50%.                exposures, as well as keeping utilisation of committed and
                                                                           uncommitted facilities to a minimum.
• As of FY2019/Q3, the short-term funding as a percentage of the
  portfolio was 47.8%. This was adversely impacted by ca.                • The Bank has furthermore voluntarily prepaid some loan
  R1.4 bn (R500m LBK11; R900m SRN’s) longer dated issuances                exposures which were maturing in a 12 month period, and that
  rolling into < 12 months bucket.                                         were expensive or included negative “rating triggers”
• Although the lengthening of the Bank’s funding maturity profile        • As at FY2019Q3, the Bank had R3.4bn cash on balance sheet
  has impacted on the Bank’s funding costs and therefore                   (R2.4bn in FY2018) with R500m uncommitted facilities and
  profitability, the funding profile is now such that the Bank’s focus     R835m committed facilities drawn with further access to
  can shift to optimisation of funding costs.                              R1.315bn in committed facilities.

                                                                                                                 Land Bank Presentation   24
Funding Matters
Reducing reliance on short-term funding
                                                               -31.1%
           69.4%
   70
   65
   60                                                                                                56.8%
                                                                56.4%
                                 54.8%
   55                                                                                                                   52.2%
   50                                                                                                          47.8%
                                             45.2%
   45                                                                     43.6%             43.2%
   40                                                                                                                             +70.6%
   35
                   30.6%
   30
   25
   20
   15
   10
    5
    0
               FY2015                FY2016                          FY2017                      FY2018           FY2019H1

                                         ST Funding (maturities < 12 months)      Term Funding

  In line with Land Bank’s commitment to reduce reliance on short-term funding, the Bank has made great strides in
  extending the maturity profile, thereby reducing refinancing risk and improving general liquidity levels of the Bank.

                                                                                                             Land Bank Presentation   25
Funding Matters
Diversified Investor Base
100%                                                                                                                                          PIC & CPD
                                                                                                             26.8%                            Banks
 80%                                                                41.1%
                                                                                                                                              Institutional & Other
 60%                       80.9%                                    2.3%                                     24.7%

 40%
                                                                    56.6%                                    48.5%                +329.2%
 20%
                                   7.8%
                   11.3%
  0%
                        FY2009                                     FY2013                                  FY2019Q3

Land Bank’s investor relations strategy is bearing fruit. Renewed investor confidence is evident with the Bank seeing increased support from existing
funders as well as new investors/ funders. The Bank has also seen a return of investors that had previously left the Bank. The Bank has a well diversified
investor base across local debt capital markets, as well as foreign funding relationships with Banks and multilaterals.

FY2019Q3             Related                                  Commercial        Foreign           Institutional       Multi-lateral         Agri
@ Nominal            Parties              DFI       SOE         Bank             Banks              Investors          Investors          Companies        Total
Drawn Facilities               -                -         -          802                    -               502                       -               -     1,304
< 1 Year               10,816              300      1,001            872                    -             6,553                       -          902       20,444
1 – 3 Years                    -            65            -          684                    -             3,069                       -               -     3,818
3 – 5 Years                    -                -    690            3,708                   -             5,535                       -               -     9,934
5 – 7 Years                    -                -         -          512                    -               563                       -               -     1,075
7 – 10 Years                   -           276            -          634               3,354                      -           1,838                   -     6,102
> 10 Years                     -                -         -                -                -                     -              92                   -         92
Total                  10,816              641      1,691           7,212              3,354            16,223                1,930              902       42,769
% Distribution          25.3%             1.5%       4.0%          16.9%                7.8%             37.9%                4.5%              2.1%

                                                                                                                                Land Bank Presentation        26
Funding Matters
Contraction in listed Bond Yields
 350
        Listed Bond Yield Curve                                                                                                 FY2017
 300       Bps over 3m JIBAR                                          285                                                       FY2018/H1
                                                                                                                269 **          FY2018
                                                                                            255*
                                                                                                                                FY2019/H1
 250
                                                                      225                   220*                                FY2019/Q3
                                                                         215
 200                                             190
                                                                         195
                                                                      194
                                                 155
 150                       140                149
                                                 135
                        115
 100                       110                                                  With Land Bank’s funding profile at an acceptable mix,
                                                                                focus will now shift towards further compressing funding
                                                                                spreads.
   50

    0
                          1YR                   3YR                  5YR                  7YR                  10YR
 • Following the Bank’s public auctions in Aug 2017, Mar 2018 and Sept 2018 respectively, the Bank’s listed bond yield curve has significantly
   improved which has contributed to improved Cost of Funding for the Bank
 • The 7YR price point (*) previously translated from LBK24 (Fixed Rate Note Issued in FY2018/Q3) – point in time spread, subsequently been
   replaced with LBK33 (Floating Rate Note Issued in FY2019/Q3)
 • The 10YR price point (**) is translated from LBK28 (Fixed Rate Note Issued in FY2019/Q1) – point in time spread

                                                                                                                 Land Bank Presentation    27
Funding Matters
Bond Yields – Land Bank, Govi’s and SOE yield curves
10.5                                                                                                                          10.29%    10.37%
                       SOE’s        Land Bank           Govi’s                                                      10.20%
                                                                                                          10.10%
                                                                                                 9.98%
10.0                                                                                  9.85%
                                                                            9.68%
                                                                  9.46%                                                       9.81%         9.87%
 9.5                                                                                                                 9.73%
                                                                                                 9.56%     9.65%
                                                          9.16%                       9.45%
                                                                            9.32%
 9.0                                                              9.14%                                                       9.12%         9.17%
                                                8.64%                                                      8.99%     9.06%
                                                          8.90%                       8.83%      8.92%
 8.5                                8.31%                                   8.71%
                                                8.48%             8.57%
                          8.06%     8.42%                 8.37%
 8.0                      8.12%
               7.64%                            8.02%
                                    7.88%
           7.60%
 7.5                      7.67%
             7.33%
 7.0

 6.5                                                                                          Assumed 3m Jibar = 7.15% (as of 3 Jan 2019)

 6.0
                 3m        6m        9m         1YR        2YR     3YR       4YR       5YR        6YR       7YR       8YR      9YR          10YR

       • It should be noted that the SOE Yield Curve includes all debt, unguaranteed and otherwise
       • 3m – 12m yields are derived from Money Market yields and > 12m yields from Capital Market yields
       • Land Bank as an Issuer of unguaranteed debt prices favourably to the SOE Curve, with pricing points as follows:
         1YR = 8.48%; 3YR = 9.14%; 5YR = 9.45%; 7YR = 9.65%; and 10YR = 9.87%.
       • Yield Curves derived from Reuters (Money Market) and JSE (Capital Market) data and represents current MtM yields

                                                                                                                   Land Bank Presentation     28
Funding Matters
DMTN issuance summary and funding needs
 Notes on the current position of the R30bn DMTN Programme
 • Issued under the programme:                R21.175bn                                                      During May 2018 Land Bank
 • Matured:                                   R 8.168bn                                                      increased its DMTN Programme
                                                                                                             size to R30 billion
 • Currently Outstanding:                     R 13.000bn (21 bonds)
 • Available:                                 R 8.825bn

                                   Summary of significant maturities to 30 June 2019
                      DMTN Maturities                                                Bi-lateral maturities
         Instrument              Amount            Date                 Instrument               Amount             Date
 LBK05 (5YR FRN)                  R0.252bn        Feb 2019      PN’s and/ or FRN’s                R0.293bn          Apr 2019
 LBK25 (1yr)                      R0.500bn        Mar 2019      PN’s and/ or FRN’s *              R1.100bn          Jun 2019
 Total                            R0.752bn                      Total                             R1.393bn
 The total refinancing need to 30 June 2019 amounts to R0.752bn (listed bonds) and R1.393bn (PN’s and/ or FRN’s).
 * - Promissory Notes with single counter party and could potentially be refinanced on bi-lateral basis

 Planned DMTN Issuances to 31 March 2019                  Land Bank intends to prepay ca. R1.43 billion existing, more expensive debt with
 • FY2019/Q4: R1.0bn Immediate refinance need             negative rating triggers linked to the Sovereign Rating and refinance same with
                                                          cheaper bond funding across similar remaining tenors.

                                                          This will effectively release all Government Guarantees across the Land Bank’s
                                                          “Commercial” funding portfolio and further reduce the State’s contingent liability
                                                          i.r.o. Land Bank

                                                                                                                        Land Bank Presentation   29
Funding Matters
Summary of funding activities for FY2019/Q3
 Funding activities excl.                                                                           FY2019           FY2018
                                 FY2019/Q1       FY2019/Q2       FY2019/Q3       FY2019/Q4
 Call Bonds and Facilities                                                                           Total            Total
 Total maturities                    R8.7bn         R13.4bn        R10.0bn                   -         R32.1bn          R46.4bn
 Debt rolled over                    R8.0bn         R13.1bn         R9.0bn                   -         R30.1bn          R38.0bn
 New funding raised *                R1.6bn          R1.5bn         R2.7bn                   -          R5.8bn          R17.5bn
 Pre-payments                        R1.7bn          R1.4bn                  -               -          R3.1bn           R3.1bn

* Land Bank has used some of the proceeds from “new funding         FY2019 to date has been a good funding year with Land
raised” to pay off existing debt as follows:                        Bank achieving average roll-over rates as follows:
 Listed Bonds (LBK05)                 R0.50bn
                                                                                                               12 Month
 Guaranteed Syndicated Loans          R2.63bn #                        Roll-Over Rates          FY2019/Q3
                                                                                                              Rolling Ave
 Total                                R3.13bn                          Excl. PIC/ CPD**             56.0%           70.0%
# As of 28 September 2018, the Bank’s R2.7 billion guaranteed
                                                                        PIC/ CPD                    100.0%          100.0%
syndicated loan has been prepaid in full, which has become too
expensive following a number of Sovereign Rating downgrades.            Total                        87.0%           89.0%

                                                                    ** This was adversely affected by certain maturities not
                                                                    being rolled during the year due to Investor liquidity
                                                                    needs, or at Land Bank’s insistence where investor yield
                                                                    expectations were unrealistic.

                                                                                                       Land Bank Presentation   30
Debt Management Programme
Sinking Fund

                            Land Bank Presentation   31
Debt Management Programme
Sinking Fund

• In line with the Bank’s commitment to its Shareholder, the Bank has appointed an Investment Manager/ Advisor to
  establish a single/ multiple “sinking fund” structures for Bank. Such a sinking fund will further enhance the Bank’s
  Balance Sheet, liquidity position, as well as reduce repayment risk of future maturing debt commitments.

• During FY2019H1, the Land Bank made its first investment into the sinking fund programme, by way of a R500million
  bullet investment allocated 100% to a combination of smaller established and emerging black Asset Managers:

         Manager 1 with AUM R17.4 billion – 40%;

         Manager 2 with AUM R3.8 billion – 30%; and

         Manager 3 with AUM R 2.6 billion – 30%.

• The Bank intends to increase this fund to ca. R1.0 billion over the short to medium term and has already earmarked a
  fourth manager, a newly established majority black woman owned manager with AUM of R1.2 billion, whom will be
  allocated R150 million by 31 March 2019, availability of liquidity dependent.

• Furthermore, in line with the Bank’s development/ transformation commitment Land Bank intends on placing at least
  50% of these funds with black Asset Managers, while at least 50% of funds will be placed through black Brokers.

                                                                                                  Land Bank Presentation   32
Interest Rate Risk Management
Managing Basis Risk

                                Land Bank Presentation   33
Interest Rate Risk Management
Background and Introduction

• The Bank’s main driver of earnings is Net Interest Income, which is the difference between interest received on loans
  granted and interest paid on funding raised.

• As such, the Land Bank developed an Interest Rate Risk Management Strategy to manage the Bank’s basis risk where
  Land Bank incurs JIBAR based interest expenses and earns Prime based interest income, as the interest rate reset
  profiles of JIBAR and Prime differ and do not move parallel when interest rates move up or down.

• In addition to the management of Basis Risk, the Bank may also elect to swap floating rates to fixed rates and vice
  versa.

• The swaps only entail the exchanging of cash flow payments between Land Bank and Counterparties

• The strategy was approved by Land Bank Board 29 May 2017, with implementation having commenced 1 June 2017.

• The strategy was reviewed and approved on 19 April 2018 and implementation is ongoing.

• As of FY2019Q3, the Land Bank had entered into 75 swap transactions to the nominal value of R9.92 billion with the
  swaps fair value totalling R80.9 million (asset).

                                                                                                Land Bank Presentation   34
Bond Auction
March 2019

               Land Bank Presentation   35
Listed Bond Auction
March 2019 Issuance – Optional redemption features

    Below there are a number of conditions set out in the Programme Memorandum, to be activated in the APS,
    which provides noteholders the opportunity to redeem an instrument under the following circumstances:
    •   Redemption in the event of a Breach of Anti-Corruption Laws or Corporate Governance Policies
    •   Redemption in the event of a Change of Control
    •   Redemption following the disposal of all or a greater part of the Issuer’s business, assets or undertakings
    •   Redemption in the event of a failure to maintain JSE Listing and Rating
    •   Redemption in the event of a Change to the Conduct of Business

        The Land Bank remains committed to adhering to strict governance and control measures, and this can be
                                seen in the protections that it gives its debt providers

                                                                                                   Land Bank Presentation   36
Listed Bond Auction
March 2019 Issuance – Draft termsheet
 DMTN Programme Details
 Issuer                             The Land and Agricultural Development Bank of South Africa (“Land Bank”)
 Issuer Rating                      Moody’s: Aa1.za
 DMTN Programme Size                R30 billion listed on the Interest Rate Market of the JSE

 Transaction Details
 Trade Date            [20] March 2019
 Settlement Date       T + 3 days
 Targeted Issue Size   [R1.0bn] across the Notes
 Instrument            Listed Floating and/or Fixed Rate Notes
 Stock Code            [LBK34]                   [LBK35]                 [LBK33 Tap]            [LBK36]
 Maturity Date         Mar 2022                  Mar 2024                Nov 2025               Mar 2029
 Term                  3-year                    5-year                  7-years                10-years
 Price Guidance        [TBC] bps                 [TBC] bps               [TBC] bps              [TBC] bps
 Pricing
                       TBC at Trade Date
 Benchmark
 Final tenors on offer and term-sheet will be finalized once market sounding has been concluded. This will be a
 function of prevailing market conditions

                                                                                                   Land Bank Presentation   37
Notes

        Land Bank Presentation   38
Thank You!
                                                                                      420 Witch-Hazel Avenue
                                                                                      Eco Glades, Block D, Eco Park
                                                                                      Centurion Pretoria
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                                                                                                        Land Bank Presentation   39
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